Central-Planning Panic

Client Talking Points

EURO

The Euro is hovering at $1.12 vs. USD with a wide immediate-term risk range of $1.09-1.16 as #cowbell fans await ECB President Mario Draghi’s next parting of the seas. We have no idea what he’s going to say – we can see clearly, though, what stock market-bailout fans are begging him to say.

STOCKS

Wacky wide risk range still very much in play, across major Global Equity markets with the U.S. range (SPX) now at 1,860-2,017 and our volatility signal suggesting 21 VIX is as probable here as 42 VIX – after covering SPY (lower) we are tee’ing up the SELL signal again.

HIKE

Oh yeah! Federal Reserve Vice Chairman Stanley Fischer woke up this morning feeling hard-core, suggesting to CNBC that he’s going to show the “market that it’s not in control” … but it is, and always is… this is the scariest comment we’ve seen yet – the Fed hasn’t tightened into a slowdown since Volcker.

**Watch the replay of The Macro Show with Internet & Media Sector Head Hesham Shaaban - CLICK HERE.

Asset Allocation

CASH

67%

US EQUITIES

0%

INTL EQUITIES

0%

COMMODITIES

3%

FIXED INCOME

30%

INTL CURRENCIES

0%

Top Long Ideas

Company

Ticker

Sector

Duration

MCD

We recently tried out the "Create Your Taste" experience at the newly remodeled McDonald’s location in Midtown East on the corner of 58th street and 3rd Ave. Walking into the newly remodeled MCD, we were greeted by the brand new self-order kiosks with attentive staff there to assist you. Customers were very interested in using the kiosks, and everyone using them seemed to be having an easy time with it.

For it being only two weeks into the process we were very impressed by the efficiency and mastery the staff is already displaying. We plan to head back to the same McDonalds location and check on their progress.

PENN

Our Gaming, Lodging & Leisure team is going to furnish a new update following their recent meeting with Penn National Gaming's management. They note that the stock has held up quite well despite increased market volatility. The bullish thesis on shares of PENN remains intact. Regional revenues remain strong in addition to the 2-year growth story, etc. Stay tuned.

TLT

As we outlined through various channels, we expect that high levels of volatility are here to stay for the foreseeable future. The biggest shift last week that we’ll call out is a bullish to more neutral intermediate-term view on the U.S. dollar which is why we added GLD to investing ideas in replace of UUP. To be clear, if growth continues to slow we want to be long of bonds (that view hasn’t changed in a year and a half).

Shift to more dovish policy: long of GOLD as the shift weakens the value of the USD

We re-iterate the same view we’ve had since the beginning of 2014: Growth is slowing, and deflation remains a real risk (central bankers can’t solve this by talking down the currency). The fed will continue to push out the dots on “policy normalization.”

Three for the Road

TWEET OF THE DAY

$LINE bonds mauled to new all-time lows today. every LINN issue now trading for less than 40c. one of the biggest HY energy issuers.

@HedgeyeEnergy

QUOTE OF THE DAY

Knowledge speaks, but wisdom listens.

Jimi Hendrix

STAT OF THE DAY

16.8% of the Harvard freshman class had one or more parents who went to Harvard.

09/03/15 08:17 AM EDT

CHART OF THE DAY: Winning (Not Whining) Is The Name of This Game

Editor's Note: The chart and excerpt below are from today's Early Look written by Hedgeye CEO Keith McCullough. We have good reason to believe this morning note is the best way to begin your market day. Give us a try and see for yourself!

...It’s really not that complicated. What complicates Wall Street’s narrative is the excuse making.

What always happens on the downslope of the cycle (see basic rate-of-change sine curve in today’s Chart of The Day) is that bullishly biased investors start to give you every reason why “stocks are cheap” (as both growth and earnings slow).

Then, as “cheap” gets cheaper, their performance starts to come unglued, their frustrations mount, and the excuse making accelerates. All I have to say about that is A) evolve (this is the 3rd#LateCycle slowdown since 2000) and B) stop whining.

Every Reason

For those of you country music fans in the Hedgeye community (rock on Jumbo Cleaves!), you’re probably familiar with a hit song by Jake Owen called “Every Reason I Go Back.” That’s where you’ll find the aforementioned quote. It’s a #beauty.

Jake Owen, like me, can be considered a jock – or a knucklehead. We’re supposed to be subservient to the intellect of the establishment. But we’re not. And we like it.

Owen was an aspiring pro-golfer turned wake-boarder (turned blown-out knee somewhere in Florida). So he picked up the guitar, grew out the flow – and the rest is history. His 1st hit (#1 on the charts) was called Barefoot Blue Jean Night in 2011.

Back to the Global Macro Grind …

Gentlemen, do you wear jeans? How about jorts? Flannel? Flip Flops? Can you pivot between suits and tees? Or is it all about rocking the pocket scarf, all of the time? Ladies?

I personally don’t care what you look like. I couldn’t give a damn about what money you make (made) either. All I care about in life is who you are. You. The real you. The one who doesn’t change with money (or without). That’s character.

On our team, players who make excuses (when wrong) don’t make it. Something like this, for example: “We think much of the decline can be attributed to technical & systematic investors that are price-insensitive and largely indifferent to fundamentals..”

Really?

I didn’t hear you blaming your bull market returns on “systematic” chart chasing and bailout money printing. And how about those “fundamentals”?

Got #LateCyle, #Deflation, or Revenue/Earnings #GrowthSlowing? Even for a big time hedgie (you can look up who it is), solving for forward revenue and earnings growth is pretty fundamental (494/500 SP500 companies Q2 average rev/eps down -3%).

But I digress. After hearing about his “strategist” chirping my clients that “the market is going up from here” at ISI idea dinners throughout Q2, I had to call him out. It’s fine. He calls me out. He actually fired me for being right. And I liked that too.

In our risk management process, on the big stuff (growth and inflation), the cycles are both measurable and glacial. That means they take time to play out. It’s one way into a cycle peak, and only one way out. #Slowing

It’s really not that complicated. What complicates Wall Street’s narrative is the excuse making.

What always happens on the downslope of the cycle (see basic rate-of-change sine curve in today’s Chart of The Day) is that bullishly biased investors start to give you every reason why “stocks are cheap” (as both growth and earnings slow).

Then, as “cheap” gets cheaper, their performance starts to come unglued, their frustrations mount, and the excuse making accelerates. All I have to say about that is A) evolve (this is the 3rd#LateCycle slowdown since 2000) and B) stop whining.

Winning, not whining, is the name of this game – so let’s get back to focusing on that. I’m on my way to Chicago this morning and in bullet point form, this is what I see:

Another bear market bounce based on HOPE for more central planning #COWBELL from Mario Draghi

GOLD correcting (again) into the ECB meeting as Down Euro = Up Dollar = Down Gold

OIL still in a nasty bear market with immediate-term downside to $35-36 for WTI and OVX range = 45-57

Bond Yields, globally, “off the lows” of last week, as they have been on no-volume equity market bounces

Oh, and literally every major macro equity market signal, from Japan and South Korea to Germany, Russia, Brazil, France, Canada, and … yes, the USA, continues to signal bearish from an intermediate-term TREND perspective.

I think much of the decline can be attributed to the cycle and complacent investors who have been largely indifferent to macro fundamentals.

the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

LEISURE LETTER (09/3/2015) - APLE, CCL, RCL

COMPANY NEWS

Station Casinos - A long-planned hotel expansion to Station Casinos' Indian gaming property in Northern California began Wednesday.

The $175 million project will add a 200-room hotel tower and other nongaming amenities to the Graton Resort and Casino, which is located in the Sonoma County city of Rohnert Park.

Station Casino manages the resort for Federated Indians of the Graton Rancheria. The project is expected to be completed late next year.

Graton, which opened in November 2013 at cost of $800 million, currently contracts with neighboring hotels for its overnight guests. Graton is near the California wine country and adjacent to several golf courses.

"The simple answer is that we need rooms and it's one of the expectations of our guests," GM, Joe Hasson said. "This expansion allows us to become a full-scale destination resort."

APLE - Apple Hospitality REIT, announced that it has closed on the previously announced acquisition of a 245-room Courtyard by Marriott in San Diego, CA for a purchase price of $56 million, or approximately $229,000 per key.

CCL - Holland America Line tests new internet social media plans. Passengers sailing on Holland America may notice different Internet packages available for purchase. The line is testing three new plans -- including one geared toward social media -- across its fleet for an indefinite time.

RCL - RCL is testing the waters at Wollongong's Port Kembla as a possible new homeport for its Australian fleet, which is fast running out of docking options in Sydney. The operator has spent years seeking a solution to the chronic shortage of berths in Sydney Harbour, where the main cruise facility can accommodate only one ship at a time and its second terminal, in White Bay, is inaccessible to larger ships that cannot fit under the Sydney Harbour Bridge. Port Kembla is about 80 kilometers (50 miles) from downtown Sydney.

INDUSTRY NEWS

Cuba Cruise Itineraries - A recent survey conducted by USA Today indicates that Cuba voyages haven't become that popular among American cruisers.

The survey of 1,034 travel agents who book cruises by Travel Leaders Group found that just 2.9% have taken a booking for one of the recently announced Cuba voyages.

Still, nearly 42% of travel agents queried said they've had a customer express interest in the trips.

One factor that may be keeping some Americans from booking the trips is that they're structured as "people-to-people" exchanges that are allowed under the USA's five-decade-old embargo of Cuba. General leisure travel from the USA to Cuba including traditional cruises still is banned.

The trips also are pricey, with fathom's new sailings starting at nearly $6,000 per couple for a week-long trip, not including taxes and port fees. That's more than triple the starting price for a typical seven-night Caribbean sailing with Carnival Corp.'s flagship Carnival brand.

Takeaway: It might take a little more time before the average cruiser is warmed up to the idea of a Cuban voyage.

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09/03/15 07:40 AM EDT

The Macro Show Replay | September 3, 2015

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09/03/15 07:34 AM EDT

September 3, 2015

BULLISH TRENDS

BEARISH TRENDS

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Early Look

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